The Israeli tech at the end of the coronavirus tunnel

How is Israel’s famed tech industry dealing with the challenges brought on by the pandemic?

AN ONLINE session at MassChallenge Israel. (photo credit: MASSCHALLENGE ISRAEL)
AN ONLINE session at MassChallenge Israel.
The ongoing COVID-19 pandemic has already sent shock waves through the global economy that are likely to ripple onward for decades to come. No industry has dodged the immediate implications of the current crisis, nor is any likely to avoid the long-term impact of the ensuing economic recession in the coming months and years. Israel’s celebrated tech industry will be no exception.
Local tech firms – from “garage-mode” start-ups to publicly traded companies – are all facing unique challenges brought on by the current crisis, each charting its own course in the tempestuous waters of uncertain markets. Their success or failure will underpin, to a great extent, the fate of the Israeli economy as a whole: though only 8% of the local workforce is employed in hi-tech, their products and services account for an estimated 30% of Israel’s total annual exports.
Much like the rest of the economy, the tech ecosystem was immediately impacted by the sudden and complete lockdown of society, which severely obstructed the day-to-day operations of many industries and the ability of large firms to collaborate remotely. But unlike the rest of the economy, the tech sector was far better prepared for this sudden shift: though they were not necessarily mindful of it prior to the COVID-19 outbreak, tech companies large and small have long been preparing for just such a reality.
Software companies working on digital products with little to no dependence on equipment and anchored to no physical location have already been running global operations for many years, with teams in New York, London and Tel Aviv collaborating seamlessly without having ever met in person. These firms will clearly adapt far more smoothly than others to the current fast-paced transition to a remote working environment. Over 70% of tech firms surveyed by Globes have reported they are ready to operate remotely for the long haul.
“Our product development team has been working out of Ukraine for years now,” reveals Adam Frank, co-founder and CTO at Wisio, a Jerusalem-based start-up building an online “Follower-to-Creator” platform that enables followers to receive personalized video advice messages and services from their favorite creators.
WISIO FOUNDERS Adam Frank (left) and Idan MaorWISIO FOUNDERS Adam Frank (left) and Idan Maor
“We are no strangers to managing parts of the company remotely, but with the entire team suddenly working from home, we’ve had some challenges in communication.”
The new reality has compelled the team at Wisio to adjust their company culture to make up for these drawbacks but has ultimately shown remote working can “significantly boost efficiency in many ways.”
A far harder pill the local tech sector has had to swallow is the considerable wave of layoffs and unpaid leaves that followed the shutdown in March. Local superstars like SimilarWeb, Zerto and Sisense have already let go hundreds of employees combined, and more companies are likely to follow suit. Out of 50 tech companies surveyed by venture capital fund Viola Ventures in April, nearly a third have reportedly already downsized their workforce; others are poised to slash wages by 10% to 30% in a bid to weather the storm.
Many of these cuts so far have been driven by an overall sense of uncertainty in the industry with respect to market conditions in the year to come and, more immediately, by a general freeze on venture capital investment rounds for the foreseeable future.
THE MODEL of higher education will have to change’: Tel Aviv University students relax (in a decidely non-socially distant way) on the first day of the new academic year, in October 2018. (Credit: Flash90)THE MODEL of higher education will have to change’: Tel Aviv University students relax (in a decidely non-socially distant way) on the first day of the new academic year, in October 2018. (Credit: Flash90)
“Investors have stopped in their tracks and are waiting for the dust to settle before they make their next move,” explains a seasoned Tel Aviv entrepreneur who preferred to remain unnamed.
MORE THAN half of 131 venture capital funds surveyed by Wizer in late March have reportedly either halted new investments entirely until further notice, or significantly scaled them down. The direct consequence of this sudden lull in capital has been to shorten the so-called “runways” – the common term for a company’s remaining lifetime based on current cash reserves and monthly burn – of existing start-ups, who now have to operate under the assumption that no additional funding will likely be secured in the next 12 months. Based on that assumption, mass layoffs and slashed wages have been the only sensible move for many companies.
“There’s no question about it – these will be very challenging times for entrepreneurs, particularly as far as fundraising is concerned,” says Yonit Golub Serkin, managing director of the prestigious MassChallenge Israel start-up accelerator program based in Jerusalem. “But entrepreneurs will ultimately serve as the engine of growth that will drive the economy back on track, as they have done in past crises; now is the time to invest in them.”
YONIT GOLUB SERKIN, managing director at MassChallenge Israel.YONIT GOLUB SERKIN, managing director at MassChallenge Israel.
Part of a global network of zero-equity start-up accelerators headquartered in Boston, MassChallenge Israel has recently launched its new 2020 cohort of 42 start-ups from all over the world, which will all undergo an intensive three-month program – all conducted virtually via Zoom, of course.
As many of these fledgling start-ups are still in the early stages of product development, the sudden scarcity of venture capital funding will greatly impact their time to market and their strategy going forward.
“Many entrepreneurs and investors are examining ways of generating revenues earlier than initially planned, in lieu of fundraising,” Serkin added. “At the end of all this, we may very well come out stronger with more sustainable businesses driving the tech sector.”
Many in the ecosystem agree with Serkin and believe those ventures that do in fact make it through the first year, are likely to be those companies that find a way to monetize on their products and services early, generating revenues and significantly lowering their dependency on funding from private investors or funds in the foreseeable future.
In a precarious and inconstant economy, the challenge of such startups will be to quickly and accurately recognize where market demand will yet remain strong and make the necessary adaptations to their products and services in order to effectively deliver on that demand.
Some startups have been quick enough to identify these trends and have indeed been capitalizing on new opportunities brought on by Covid-19. Adam Frank and his co-founder at Wisio, Idan Maor, have been quick to recognize a change in their users’ behavior immediately following the global shutdown, and an opportunity to grow their operations amidst the crisis.
“Within a few weeks of the shutdown in the US, we saw our monthly revenues quadruple,” relates Adam. “We contacted some of the creators who use our platform to investigate what was going on, and quickly discovered that many of them have seen their advertising deals with big brands canceled, forcing them to look for alternative business models, like selling services to their followers online, which is precisely what Wisio empowers them to do.” An abrupt change in the advertising industry induced by the pandemic, created a mass migration of social media influencers and creators to platforms like Wisio, and a historic opportunity to reach new audiences.
“We soon understood that COVID-19 was probably the best thing that could have happened to us as a start-up,” Adam concludes. “The key to succeeding in these circumstances will be the age-old Darwinian principle: adapt or die.”
PARTICIPANTS AT the DLD Tel Aviv Digital Conference, Israel’s largest international hi-tech gathering, featuring hundreds of start ups, VCs, angel investors and leading multinationals, get hands-on with some tech. (Credit: Miriam Alster/Flash90)PARTICIPANTS AT the DLD Tel Aviv Digital Conference, Israel’s largest international hi-tech gathering, featuring hundreds of start ups, VCs, angel investors and leading multinationals, get hands-on with some tech. (Credit: Miriam Alster/Flash90)
No doubt, the ongoing tectonic shifts in the global economy will wipe out some industries and severely curtail many others that prove unable to adapt. But they will simultaneously create openings for new industries driven by changing consumer behaviors and a demand for new solutions to new unanticipated challenges. Companies that correctly identify and seize these opportunities will be the driving force behind the new global economy.
“Entrepreneurs are going to create the new normal in the post-COVID age,” as Josh Gottesman, director of programming at MassChallenge Israel puts it. “The same driven people who had a vision for how the world needs to change before Coronavirus ever came, will be the same people who passionately put forth and promote newly formulated visions for the world, adjusted for Corona.”
ONE INDUSTRY that is already showing signs of rapid growth and great promise is the e-learning industry. Though online courses and learning platforms have been popular for well over a decade, tens of millions of people around the world have turned to sundry online courses in recent weeks to expand their skillset and leverage their time at home.
Millions of students enrolled in colleges, universities and other traditional academic institutions whose campuses have emptied, now run through classes with the click of the mouse; entire curricula have been reinstated online virtually overnight. This dramatic shift, born out of necessity, is highly likely to spark far-reaching and fundamental reforms in the way academia is run.
“The model of higher education will have to change,” Gottesman believes. “Universities will be forced to reexamine their methods and systems of teaching to keep their edge in this new atmosphere, where more people are likely to opt for online accredited courses in the coming years as an alternative to a traditional degree.”
The food tech industry has also felt the winds of change arrive with the onset of the current pandemic. The shutting down of restaurants all over the developed world and the rising popularity of takeaway orders have been some of the immediate consequences of the ongoing lockdown. Yet a far more interesting question to examine is the long-term changes to consumer behavior that will be seen in its wake.
“If you examine Google’s statistics on popular search queries in recent weeks, there’s been a sharp spike in searches for recipes,” points out Hemdat Goldberg, co-founder and CEO of Poiike, participating in the current MassChallenge 2020 cohort. Together with her two co-founders, Isaac Hassan and Alex Ya’akobov, Goldberg has been developing a digital platform that streamlines home cooking for maximum efficiency by deconstructing recipes into tailor-made, easy-to-follow cooking workflows.
“It’s easy to understand why millions of people who are confined to their homes tend to cook more,” Goldberg continues, “but when we consider that many millennials who are used to eating out regularly might now be trying their hand at cooking for the first time, we understand we could be looking at a generational behavioral shift.”
The financial strain brought on by COVID, no doubt, will also contribute to a widespread return to home-cooked meals as many tighten their belts and cut back on eating out.
Nor will our production of food be spared the shock waves of coronavirus. Significant disruptions to global food supply chains have already been reported, causing price gouging and downright shortages in basic foodstuffs like rice, milk and meat all over the world. Though most experts believe these will prove no more than temporary hiccups in our system, that system has revealed some of its underlying weaknesses over the past several weeks, raising red flags for many in the industry.
Increasing efficiency in food production will become ever more important in the overall effort to make food supply chains more robust and to solidify local food security. DriftSense, yet another participant in the MassChallenge 2020 program, has been aiming at the optimization of pest control in agriculture.
DRIFTSENSE PESTICIDE monitoring systemDRIFTSENSE PESTICIDE monitoring system
Founded by three PhDs from Bar-Ilan University – chemist Elad Segal, geo-physicist Ran Shauli and biologist Pavel Kunin – DriftSense monitors pesticide drift and models its dispersion efficiency, thereby helping growers reduce costs, maximize yields and safeguard the environment.
“Our solution brings scientific accuracy to a part of agricultural production that has so far been managed by rough guestimates,” claims Segal, CEO of the company. “In the coming years, every bit of food we waste in production will count.”
In an intricately interconnected global economy, no cog can be separated from the machine. Every market, industry and sector will be greatly changed by the tectonic shifts now rumbling under our feet, though we can scarcely imagine what each will look like when the dust settles. New problems and new needs will propel mankind to find new solutions – and tech entrepreneurs will certainly be in the vanguard of the effort to provide them.
“A lot of traditional professions will disappear along the way,” predicts Adam Frank of Wisio. “Millions have already lost their jobs and will be pushed to reinvent themselves. Ex-employees will turn into mini-entrepreneurs and will build their own micro-businesses. Some of them will build the next tech giants in the coming years.”
SIGNIFICANT DISRUPTIONS to global food supply chains have already been reported: An Israel Police officer and Jerusalem city workers check whether eggs were being sold on the black market on April 8. (Credit: Olivier Fitoussi/Flash90)SIGNIFICANT DISRUPTIONS to global food supply chains have already been reported: An Israel Police officer and Jerusalem city workers check whether eggs were being sold on the black market on April 8. (Credit: Olivier Fitoussi/Flash90)